Axis Bank is not seeing any rise in risk in its unsecured lending portfolio even as it has stayed away from offering personal loans below Rs 50,000, said Amitabh Chaudhry, the CEO of India’s third-largest private sector lender.

The bank is keeping a close watch on any potential slippage in personal loans while growing its book based on internal risk appetite.

"We continue to grow our personal loan portfolio based on risk guardrails we have set for ourselves. Nothing in the book is indicating a rise in risk. We continue to watch for any risks emanating in the economy," Chaudhry told reporters after the lender announced its fiscal second quarter results on Wednesday.

The bank’s unsecured personal loan book grew 25% year-on-year to Rs 61,168 crore as of 30 September. About 24% of the bank’s retail book was unsecured. Housing loans, which is the largest retail loan segment for the bank, is secured and accounts for 31% of all such loans.

While delinquencies are rising in the sub-Rs 50,000 loan category for unsecured loans, Axis Bank has chosen to remain out of it, said Sumit Bali, group executive and head of retail lending at Axis Bank. 

Large banks and non-banking financial companies (NBFCs) have identified small personal loans below Rs 50,000 as risk-carriers.

For the quarter ended September 2023, Axis Bank’s outstanding credit card loans grew 72% year-on-year to Rs 35,848 crore. The sharp rise in credit card loans was due to the bank’s acquisition of Citi’s card portfolio, which was concluded in March.

Meanwhile, Axis Bank on Wednesday reported a 10% year-on-year rise in net profit to Rs 5,864 crore in the September quarter on the back of higher loan growth.

The lender’s net interest income grew 19% year-on-year to Rs 12,315 crore. Other income for the quarter rose 31% from a year ago to Rs 5,034 crore. Net interest margin for the quarter was at 4.11%, up 1 basis point sequentially.

The bank’s asset quality improved, with gross non-performing asset (NPA) ratio falling by 23 basis points quarter-on-quarter to 1.73%. Similarly, net NPA ratio fell to 0.36% as against 0.41% in the preceding quarter.

During the quarter, fresh bad loan additions fell to Rs 3,254 crore from Rs 3,990 crore in the April-June quarter. Upgrades and recoveries were lower at Rs 1,985 crore compared to Rs 2,305 crore sequentially.

Write-offs during the September quarter rose 25% to Rs 2,671 crore compared to Rs 2,131 crore in the preceding quarter.

Provisions for the July-September period rose to Rs 815 crore, up 48.2% year-on-year but down 21% sequentially.

Axis Bank said it did not use covid-19 provisions during the quarter and held cumulative provisions of Rs 11,758 crore as of 30 September. This was over and above the NPA provisions included in the provision coverage ratio (PCR) calculations.

The lender’s loan book grew 23% year-on-year to Rs 8.97 lakh crore. Domestic advances grew 26%, with retail loans rising 23%. Lending to small and medium enterprises was up 27% while corporate loans grew 21%.

The bank’s total deposits grew 18% from a year ago to Rs 9.55 lakh crore. Low-cost current account savings account (CASA) deposits, as a ratio of total deposits, stood at 44% as of 30 September as against 46% a year ago.

"While headline deposit growth came in at 18% year-on-year, the deposit growth was 13% year-on-year once adjusted for the Citi merger and is significantly lower than that seen for peers," Bernstein Research said in its report.